The Relationship Between Audit Committee Characteristics and Financial Performance of Listed Banks in Ghana

Joseph Kwasi Agyemang

doi:10.7176/rjfa/11-10-03

Abstract

This study presented a description of the performance of eight banks listed on the Ghana stock exchange using return on equity and return on asset as performance indicators. It also presented aggregate information on the performance of these eight banks over a five-year period. It further analyzed the association between performance and audit committee size, independence, audit committee members’ expertise and experience and gender diversity of the audit committee. Audit committee size and the expertise and experience of audit committee members was found to be positively correlated with return on equity. However, the independence of the audit committee members and gender diversity of the committee had a negative correlation with return on equity. Similarly, audit committee size and the expertise and experience of audit committee members correlated positively with return on asset. However, audit committee independence and gender diversity had a negative correlation with return on asset. This means in response to the hypothesis; ROE is positively related to audit size and the audit members’ expertise and experience but negatively related to audit committee independence and gender diversity of the audit committee. Similarly, ROA is positively related to audit size and the audit members’ expertise and experience but negatively related to audit committee independence and gender diversity of the audit committee. Keywords: Audit committee, Return on Assets, Return on Equity, Financial Performance DOI: 10.7176/RJFA/11-10-03 Publication date: May 31 st 2020

Highlights

Background of the StudyOne of the best corporate governance practices that has received the attention of financial policy-makers and researchers in recent years is auditing
1.2 Objectives of the study The main object of this study is to assess the effect of audit committee characteristics on the performance of listed banks on the Ghana Stock Exchange (GSE)
This study investigates the effects of audit committee and audit fees on the performance of banks and non-banking institutions in Ghana which can be understood by the institutional, resource-based, systems and transaction cost economics theories which are linked to the research objectives indicated in chapter one of this study

Summary

Introduction

Background of the StudyOne of the best corporate governance practices that has received the attention of financial policy-makers and researchers in recent years is auditing. It is widely claimed that the monitoring role of audit committees is a key element in corporate governance which helps to control and monitor managers’ practices (Campbell & Mínguez-Vera 2008; Afify, 2009). It is believed that audit committees can improve the quality of financial reporting and decrease audit risk, thereby improving the quality of reported earnings (Contessotto & Moroney 2014; Abernathy et al 2015). These claims mean that auditing and audit committees play an important role in overseeing and monitoring a company’s management, with the aim of safeguarding the interests and investments of the owners (Kallamu & Saat 2015). The role covers wider areas including the monitoring of managers and review of the company’s internal control system (DeZoort et al 2002; Aldamen et al 2012)

Objectives

Findings

Discussion

Conclusion